Crafting a household-centered bailout

I’ve pretty much been on board with the idea that we need to save the financial system in order to help re-start the economy. I’m not happy with many of the specifics (I generally think the existing financial players are getting too many breaks), but I’m willing to see the government do something to keep the financial system alive in the short run.

What’s been seriously lacking so far, though, is an equivalent emphasis on a bailout for American households and individuals. Helping actual people has been way down on the priority list.

And apparently even programs targeted at households are not doing so well. The New York Times and others report that the Bush and Obama administrations’ programs to help homeowners who are underwater on their mortgages (owe more than the house is worth) or that face foreclosure are starting out very slowly. Perhaps it will take some more time, but when will issues directly affecting American families get the attention they deserve? We can go a lot farther that we have to help families themselves.

For example, from the NYT article:

“Even if they do drop your loan payment, you can still be in deep negative equity, which is not an immediate crisis,” said Adam J. Levitin, an associate professor at Georgetown University Law Center. “But let’s say you need to relocate because the auto manufacturer you work for is radically downsizing. You are faced with losing your house in foreclosure or a huge balloon payment. And neither of those is palatable.”

One of the ways our economy will rebound is if workers can get to where the jobs are. Today’s out-of-work employees first have to get out from under their houses. That likely leaves them broke and unable to afford to move. We could develop some sort of “labor market restructuring assistance program” (LMRAP – limrap – not as cute as TARP, I’ll admit) that makes it easier for people to get out of their homes (with, dare I say, even some debt forgiveness) and money to move should they find a job.

Sure, it’s not that simple, and there would be all kinds of details to work out. But it sure wouldn’t be any more complex than the bailout of the financial markets. And it would be a people/family-centered bailout, directly helping them get over some of the worst parts of this economic downturn.